ASAP

Proposed French Law Would Impose New Due Diligence Obligations on Certain Employers and Their Supply Chains

By Littler Mendelson’s Business and Human Rights Practice Group and Alexandre Roumieu on

December 12, 2016

On November 29, 2016, France’s National Assembly adopted the text of a bill (the “Bill”) that, if enacted, would create new due diligence obligations for large French companies regarding their subsidiaries’ and supply chain members’ labor practices.1 Under this Bill, covered companies must create and implement a “vigilance plan” to identify and prevent “serious violations of human rights and fundamental freedoms and the health and safety of people and the environment[.]”2 Championed by President François Hollande and his Socialist Party, the Bill currently stands as one of the broadest national measures that seek to hold companies accountable for human rights abuses in their supply chains. Some commentators expect that other European countries will adopt similar measures.3

In its current version, the obligations imposed by the Bill apply to any company headquartered in France that has: (a) 5,000 or more employees, including employees of any French subsidiaries; or (b) 10,000 or more employees, including French and foreign subsidiaries. Each covered company must create and implement a “vigilance plan” that identifies and works to prevent human rights violations – including forced labor – in the operations of the company and its subsidiaries. Most notably, the Bill requires that the vigilance plan address activities by the company’s subcontractors and suppliers (“supply chain entities”), where the company maintains an on-going business relationship with the supply chain entities and the activities at issue that involve the business relationship.4 The Bill requires that the vigilance plan, as well as the minutes related to its implementation, be made available to the public.

Under the Bill, a vigilance plan must include:

A method for identifying, analyzing, and prioritizing the different areas where risk of human rights violations exists –“risk mapping”;

Procedures for regularly evaluating subsidiaries, subcontractors, and suppliers, based on the risk-mapping;

Actions to mitigate the risk of, and/or the severity of the harm caused by, the violations;

Mechanisms for reporting and for receiving alerts about potential violations, prepared in consultation with the company’s labor unions; and

Methods for tracking the vigilance plan’s efficacy.

The Bill also authorizes the government to supplement these required elements of the vigilance plan.

Notably, the Bill contains stringent enforcement mechanisms. Any person with a demonstrable interest may demand that a company comply with the due diligence requirements (i.e., creating and implementing a vigilance plan), and, if the company fails to comply, a court may fine the offending company up to 10 million euros, depending on the severity of the breach and other attendant circumstances. What is more, if a company’s activities – or the activities of its supply chain entities – cause harm that could have been avoided by implementing its vigilance plan, the size of the fine can be trebled (up to 30 million euros), depending on the severity and circumstances of the breach and the damage caused, and the company can be ordered to pay damages to the victims.

This Bill is not currently the law, and its fate is uncertain. The final vote on the Bill in the Senate and National Assembly will likely occur later in December 2016 or January 2017. However, if at least 60 legislators request it, the French Constitutional Court will have to validate the Bill before it can enter into force. Indeed, some senators have expressed concerns that the Bill poses some potential violations of French Constitutional law. Moreover, the upcoming 2017 presidential and legislative elections are poised to change the make-up of the government, casting further doubt on the Bill’s fate.

Regardless of whether the Bill passes into law, its progress in the French legislature exemplifies recent efforts, at the sub-national, national, and supra-national level, to codify non-binding international norms – like the United Nations’ Guiding Principles on Business and Human Rights (the “UN Guiding Principles”) – into enforceable “hard law” obligations. Indeed, the Bill’s obligation to publicly disclose corporate efforts at preventing and redressing human rights violations are similar to those obligations imposed by the California Transparency in Supply Chains Act and the UK’s Modern Slavery Act 2015.5 However, employers should take note that this proposed French law is more onerous than its California or UK counterparts in two important respects: first, it creates a private right of action, and second, its penalties for violations are more severe.

Littler will continue to monitor the progress of this Bill and similar developments to hold employers accountable under “soft law” norms such as the UN Guiding Principles.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.